Stock Futures Squeeze Out Advances as Fed Begins Meeting

NEW YORK ( TheStreet) -- U.S. stock futures were eking out gains Tuesday as the Federal Reserve began a two-day policy meeting.

Futures for the S&P 500 were up 4 points, or 6.42 points above fair value, to 1,686.5 while futures for the Dow Jones Industrial Average were up 25 points, or 50.03 points above fair value, to 15,508. Futures for the Nasdaq were rising 10.25 points, or 13.55 points above fair value, to 3,075.75.

"We ... believe the taper bias will continue to be softened in light of data suggesting economic growth is slowing as well as the tightening in financial conditions that has occurred since the June FOMC meeting," Laura Rosner, a New York-based U.S. economist at BNP Paribas, said in a report.

The Fed begins its meeting Tuesday with its policy announcement scheduled for Wednesday. Tomorrow will also bring second-quarter U.S. gross domestic product figures. The week will conclude with the release the U.S. government's July non-farm payrolls report on Friday.

A number of U.S. economic reports were scheduled for Tuesday. The S&P/Case-Shiller 20-city home price index showed a lower-than-expected year-over-year gain of 12.2% in May following a 12.1% increase in April. Expectations were for a gain of 12.4% in May, according to a Thomson Reuters poll of economists.

Set for 10 a.m. release, the Conference Board's Consumer Confidence Index is forecast to come in at 81.4 for July, unchanged from June.

On the earnings front, Merck ( MRK) was slipping 0.4% to $48.14 after reporting second-quarter net income that shrank to $906 million from $1.793 billion a year ago as the drug maker continues to navigate significant patent expirations, seeing sales of its allergy medication Singulair drop by 80%. Earnings per share on an adjusted squeezed past estimates by a penny at 84 cents a share.

Coach ( COH) was tumbling 5.9% to $54.36 after the luxury goods company posted in-line quarterly earnings of 89 cents a share as sales in its North America market softened and Coach announced that North American Group president Mike Tucci and chief operating officer Jerry Stritzke have resigned and will depart at the end of August.

Fertilizer companies came under deep pressure Tuesday on expectations that potash prices could drop by as much as 25% to roughly $300 a ton by year end after Russian potash giant Uralkali pulled out of a marketing venture with Belarus, breaking up one of the world's largest of such partnerships that controlled nearly half of the global potash market. Potash Corp. ( POT) was plunging 24.54% to $28.64 and Mosaic ( MOS) was plummeting 27.89% to $38.40.

Twenty five companies were scheduled to release second-quarter earnings before Tuesday's opening bell.

So far, 274 companies have reported earnings results for the second quarter. Of those, 180 have topped analysts' estimates -- 68 have missed and 26 have met, producing a beat rate of 66%, which is above the historical average, according to Christine Short, an associate director for global markets intelligence at S&P Capital IQ.

Guidance for the third quarter has been provided by 56 companies and of those, 30 have been negative, 15 have been positive and 11 were in-line, generating a negative-to-positive ratio of 2, which is close to the 15-year average, according to Short.

Russ Koesterich, global chief investment strategist at BlackRock in New York wrote in a client note Tuesday that there's been a weaker trend in the overall economic data, which raises the prospect that corporate earnings estimates may need to be scaled back.

"So far, second-quarter earnings results have been passable, but it is important to remember that companies are beating already-lowered expectations," he said. "Analyst expectations for the third and fourth quarters are considerably higher and may need to be ratcheted down if growth disappoints. This scenario creates a potential risk for U.S. stocks."

The benchmark 10-year Treasury was rising 4/32, lowering the yield to 2.593%. The dollar was falling 0.03% to $81.64 according to the U.S. dollar index.

The FTSE 100 in London was up 0.18%, while the DAX in Germany was adding 0.24%. The Nikkei 225 in Japan finished ahead by 1.53%, while the Hong Kong Hang Seng index rose 0.48%. GfK market research group said Tuesday that its forward-looking gauge of consumer confidence increase to its highest level in nearly six years for August thanks to a robust job market and the possibility of more healthy economic growth.

September crude oil futures were slipping 64 cents to $103.91 a barrel, and August gold futures were falling $6.90 to $1,321.50 an ounce.

U.S. stocks fell to their lowest level in almost two weeks on Monday amid concern that markets have risen too high this year, and that when the Federal Reserve does decide to pullback on its stimulus measures, equities could start to tumble.